The Von Essen House of Cards.

As many of you will be aware in the last couple of weeks saw the demise of the von Essen Holding Company. The company had been set up by Andrew Davis fell in administration with debts rumoured to be in the region of £220 – £250 million. Ordinarily I wouldn’t really bothered doing a post on such a news item, but when the news broke via twitter at 8:13am on April 21st, there was very little in the way of sympathy for the Mr Davis & his company. In fact so many got in contact with the blog to register what they saw as his comeuppance it was quite surprising.

Along with an aggressive purchasing agenda, the group also started to implement new payment terms. Just about every supplier that wanted to deal with Von Essen had to abide with the 90 day payment terms and in some cases that wasn’t enough. The Chef Hermes blog has learned that on more than one occasion debt recovery companies have applied for winding up orders against von Essen for non payment.

Ernst & Young were appointed administrators, and Mr Davis was replaced as Chairman by experienced insolvency practitioner Mr David Duggins.

On being appointed one of the joint administrators, Angela Swarbrick, said:

“It is business as normal for the hotels and customers of von Essen Hotels can continue to enjoy their stay.”

Hmm an interesting concept when your suppliers are out of pocket & reticent to recommence deliveries. A Supplier who didn’t want to be named, claimed that he was over £200,000 out of pocket & stories are surfacing that kitchen staff are using local supermarkets for provisions. The problem I have with this, is that the senior staff at von Essen’s head office have the attitude that it is everybody elses fault except their own. As early as March 2005 several suppliers took the stance of refusing to supply the hotel collection. With New Wave Seafoods tweeting to us:

Such is the arrogance in the von Essen Head office, a spokesperson is quoted as saying:

Most of the hotels von Essen buys are run by owner-managers who do not run efficient accounting systems,

She then went on to say,

These often disordered procedures take time to assimilate into our professional structures.

So 90 days payment period isn’t enough and yet they claim to be professional?

Such is the tangled web of companies that is the von Essen Group, it was hard to make out which company had actually gone belly up. To clarify the position there are two companies being handled by the Administrators Ernst & Young, they are von Essen Hotels Limited & von Essen Hotels 1 Limited. Yet when I investigated the Companies House Website there are at least 15 Companies coming under Mr Davis’s control and this is where it becomes difficult to see who controls what and this became even more apparent with the liquidation of Hunstrete House on May 3rd.

Fortunately for me I’ve spoken with a former General Manager of a von Essen property who explained the inner workings of the group. Each property would pay another von Essen Company a ground rent, in this case £20,000 per month for a small Somerset/Avon hotel. Then at the end of the year, ‘adjustments‘ would allegedly be made to the year end financial books for entertaining etc thus reducing the profitability of that hotel (or company, as many were set up as limited companies to reduce liability).

Many assume, wrongly I might add, that every time there was an announcement from von Essen concerning yet another purchased hotel that it would fall into the sprawling empire of hotels. As has been highlighted by the liquidation of Hunstrete House, there was a separate collection within von Essen which was owned by Mr Davis and operated (sometimes funded) by von Essen. These hotels I’m lead to believe are Hotel Verta, Hunstrete House, The Forbury & the latest acquisition Llangoed Hall. Such is the complexity of the company structure I’ve had a stab at trying to illustrate it in a simplified form, but even then it’s not that clear.

As the administrators Ernst & Young get to grips with the von Essen accounts it was inevitable that there would be casualties and on May 10th six senior managers were offloaded. We tweeted as much on May 4th:

During the course of this story unfolding, it still came as a surprise what had actually happened. I had been told that in the weeks leading up to the administration that there were new investors on board with von Essen & that this would be reducing the debt. Such is the level of debt saddled on von Essen, £14 m wiped out any chance of profit in the last set of published accounts. This may have been the reason that the Qatari Royal family were rumoured to be the new investor. With an estimated worth of £2.4 billion and investments in various businesses global (including the ownership of Harrods), they are shroud investors. The talks were at an advanced stage & sources from within von Essen were convinced it was a done deal, so much so a dinner meeting was held at Lewtrenchard Manor with the new investor & senior members of the von Essen team just weeks before Barclays & LloydsTSB pulled the plug on April 21st. It must have been a large collective sigh of relief from the hotel managers, who were going to be grilled by the new investors about their performance.

So where does this leave the von Essen hotel group? The general consensus is that the group will be broken up such is it’s diversity, although there are rumours circulating that the Qatari Royal family are still interested in the group as a whole along with London & Regional (owners of Hilton Park Lane & one of the largest property companies in Europe) & Akkeron Hotels (Set up by former Citibank banker James Brent).

As for Mr Davis, I doubt the industry will have seen the back of him. But while researching this article it became so apparent that there are many stories of where his wealth came from. Was it art deals (as he claimed in March 2006) or as many believe, from family member Aunty Countess von Essen? Who apparently has had to much plastic surgery, according to the Daily Mail.